Different Securities Issued by the Same Company Have Different Levels

question 102

Multiple Choice

Different securities issued by the same company have different levels of risk so that:

• A)equity (stock)has the highest risk, debt (bonds)the lowest, and preferred stock is in between.
• B)equity (stock)has the lowest risk, debt (bonds)the highest, and preferred stock is in between.
• C)Preferred stock has the highest risk because it's an unusual security that doesn't interest many investors, equity (stock)and debt (bonds)are about the same.
• D)debt is the riskiest security because companies often default on bonds before failing entirely; preferred stock is a little safer than common stock, that's why it's called preferred.

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Definitions:

Instrument Used

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Validity Evidence

Information or data that supports the accuracy and appropriateness of the inferences made from test scores or other assessment outcomes.

Accumulated Validity

The overall demonstration of a test's validity, based on the aggregation of evidence from multiple studies and sources over time.

Generalized Validity

Refers to the extent to which the results of an assessment can be reliably applied across different contexts, populations, or settings.